Discounted Certifi cates (Process ng pag account ng vouchers)

Sales of discounted certificates and product vouchers, often referred to as “deal of the
day” vouchers, are not subject to Wisconsin sales and use tax at the time the certificate or
voucher is sold because these sales are considered nontaxable sales of an intangible right. Tax
applies when the certificate or voucher is redeemed by the merchant providing the goods or
Under a typical scenario involving discounted certificates or product vouchers, a
merchant enters into an agreement with a promotional company to have that promotional
company sell, at a discount from face value, certificates that may be redeemed for the face
value of the certificate when purchasing goods or services from that merchant, or to have that
promotional company sell vouchers that may be redeemed for a particular good or service that is
furnished by the merchant to the holder of the voucher. In either situation, the retailer can
identify the amount for which the certificate or voucher was sold to the customer.
In the case of a discounted certificate, the merchant who accepts the certificate in
exchange for goods or services has receipts from the sale of such goods or services in an amount
equal to the amount for which the certificate was sold by the promotional company, plus any
additional amounts it receives from the person using the certificate as payment for the goods or
services purchased. The merchant is the retailer of the goods or services sold because the
merchant is the person actually transferring the goods or services to the purchaser. The
merchant's sales price of the goods or services includes all consideration received by the
merchant for the sale, without deduction for any expenses incurred by the merchant and paid
to the promotional company for its services of advertising and selling the certificates. The
merchant's sales price of the goods or services does not include the difference between the
face value of the certificate and the amount the purchaser paid the promotional company for
the certificate. Assuming the difference is not reimbursed or paid to the seller by a third party,
this amount is specifically excluded from the retailer's sales price as a discount allowed by the
seller and taken by the purchaser.
In the case of a product voucher, when the customer redeems the voucher for
particular goods or services, a sale of those goods or services has occurred and tax will apply to
the sales price of the voucher if the goods or services being sold are taxable. The merchant
accepting the voucher is the retailer of the goods or services because the merchant is the person
actually transferring the goods or services to the purchaser. The merchant is liable for tax on the
basis of the sales price of the voucher, provided the good or service represented by the
voucher is taxable. The merchant's sales price of the goods or services sold using the voucher
includes all consideration received by the merchant for the sale, without deduction for any
expenses incurred by the merchant and paid to the promotional company for its services of
advertising and selling the vouchers.


2. Coupons of the 21st Century: The Golden Age of The Daily Deal
Groupon and LivingSocial, founded respectively in 2008 and 2009, feature discounted
gift certificates and coupons to local or national companies. In order to reach consumers, these
sites use special marketing techniques intended to match the needs of their target markets.
Additionally, both companies rely on the benefits provided by social media sites such as
Facebook and Twitter to actively reach consumers on both a local and national level. Groupon
and LivingSocial utilize social media sites as a public forum, posting the daily discounts and
promotions, and as a relationship-building tool to maintain communication with consumers
(Arasbshahi, 2010).
Groupon, headquartered in Chicago, serves over 500 markets and 44 countries. The
company was launched in 2008 by Andrew Mason and now has over 10,000 employees located
throughout the world. According to its website, “We want each Groupon purchase to feel too
good to be true, from the moment you buy the deal to the day you use it” (Groupon, 2012, p.
1). A unique feature to the company is its tailored “Groupon Now” service as well as its Groupon
VIP program. Groupon Now is a smartphone and tablet-friendly application that allows users to
push an “I’m hungry” or “I’m bored” button to view the best and closest deals for food and
entertainment. The Groupon VIP program, launched in February 2012, offers members access to
deals 12 hours earlier than non-VIP members at a fee of $30 a month (Groupon, 2012, p. 1).
Living Social, based in Washington, D.C., operates in over 600 markets across six
continents. The company has more than 60 million members worldwide and the numbers of
vouchers purchased since the company was founded in 2009 total 63 million. (LivingSocial,
2012, p. 1) The company specialize in daily deals for escape and travel packages, family friendly
activities, adventures, takeout and delivery, and gourmet dining. According to its website, “We
help great local businesses grow by introducing them to high-quality new customers, and give
merchants the tools to make our members their regulars” (LivingSocial, p. 1).

LivingSocial and Groupon offer a new deal each day to all members who subscribe via
email. Both web services email subscribers at least two times a day to promote discounts on
products and services offered by merchants at both a national and local level. In terms of local
promotions, the deals depend on the geographic region chosen by each subscriber. Through the
initial enrollment process, the subscriber indicates their zip code, gender and age. Then, the
companies send consumers the most relevant deals based on the information provided through
email messages, Twitter blasts, and Facebook posts.
Both Groupon and LivingSocial employ a large number of copywriters to draft
descriptions of each deal featured by email, website, and social media postings. The promotional
text has been seen as a contributing factor to the success and popularity of the sites (Dholakia &
Kimes, 2011). More specifically, copywriters rely on a unique mix of thorough fact-checking
statistics and witty humor to relate to their target market.

Groupon, in particular, uses creative, humorous and witty content to relate to subscribers on a
friendly and lighter level. Each company scripts artistic content through poetic and humorous word
choice to entice subscribers to purchase deals.
Groupon, LivingSocial and other companies in the daily deal industry have potential for growth
and expansion. If daily deal websites continue to relate to its audience on a national and local level,
communicate with subscribers through humorous and witty messages, rely on social media sites to
provide open and honest feedback with users, they will continue to see success in the coming future. The
business model used by both companies will be sustainable as long as they continue to offer value to both
subscribers and businesses involved in the daily promotions. According to Arabshahi (2010), “Almost 88.2
million people, half of all U.S. adult Internet users, will redeem an online coupon in 2011, and this number
should increase to 96.8 million by 2013” (p. 6). At the end of the day, consumers are always going to search
for the best deal, thus, fueling the long-term growth and sustainability of the daily deal industry.

The daily deals industry is one of the fastest growing industries that have emerged in
the 21st century. New daily deal sites are being launched almost every day, and the flurry of
activity is attracting investors like honeybees to stake a claim in the profits. Groupon, the
industry leader, offered its first deal in 2008. Today, Groupon has an estimated 150 million
subscribers. Groupon’s main competitor, LivingSocial, has over 72 million members.
The most attractive and successful deals are marketed to consumers with the right
demographic, offer quality discounts, and are well managed by the merchants who must be
prepared for an increase in the volume of traffic. Daily deal websites must be careful which
deals are run on their websites, matching them with the interests of their audience (“The Rise
of the Daily Deal”, 2011). In the beginning, daily deal websites focused on offering deals for
restaurants and spas only. However, with the growth in the number of websites, now
estimated at over 600, the array of products and services offered has also expanded greatly.
Almost any consumer good or service can be discounted and advertised on a daily deal website.

The mechanics of the daily deals industry parallel the advertising industry. Both seek
to attract customers to the merchants they represent. As with the advertising industry, while
interest elicited among the customers is important, the eventual success is measured by the
impact on the merchants with whom they partner. In this three-way arrangement, it is clear
from the growing number of subscribers that customers are apparently satisfied. Thus, success
is not hinged on whether customers will buy. Rather, the success of the industry is dependent
on the willingness of merchants to “buy” offers from the daily deal providers (Jacobs, 2012,

Consumers have turned to websites such as Groupon and LivingSocial to save money
at local businesses. Some offers give better deals to coupon buyers who recruit other buyers.
This approach makes more people aware of the deals available on the daily deal websites
through word-of-mouth. There are millions of subscribers who receive deals from a rapidly
growing number of websites. Many of the websites hire recruiters in different cities to
encourage small, local businesses to use daily deal promotions. These recruiters typically would
have spent many years in the town or city, and are aware of the trends among local people.

Groupon promotions provide small businesses an opportunity to advertise their
products and services to a large number of people. The goal of the promotion is to attract new
customers to visit the business to redeem a coupon on a product, and then convert them to
repeat customers. The promotions are thus used as a source of revenue as well as an
advertising tool. Although some small businesses may not make a profit on a daily deal
coupon redeemed, they find that there is enough value in attracting a new customer base to
take a loss on the promotion.
Many businesses that run profitable Groupon promotions find that a large proportion of
the coupons are never redeemed. In such cases, it is to be inferred that the unredeemed
coupons did not help the business create new repeat customers. Finally, a business should be
adequately prepared for the promotion and be sure to provide a quality product or service to
every customer, whether or not they use the promotion. This is especially true for services.
Sometimes, a business takes a loss on the transaction simply because the coupon is worth more
than the profit received from the transaction. In these situations, the employees and owners
might be tempted not to offer the customer the same experience as they would a customer
paying full price. It is important to remember that the goal of the promotion is to create repeat
customers and gain the company a positive exposure. Satisfied customers will be more likely
to return and spread the word about the business.
The best way for a merchant to make profits from Groupon promotions is to attract
new customers, and then turn into repeat customers.

LivingSocial defines itself as a lifestyle website. It not only wants to save its customers
money on everyday goods, but also provide them with unique experiences. LivingSocial’s
Escapes provide deals and discounts on travel. However, unlike Groupon, instead of offering a
discounted hotel alone, it bundles the deal with local activities. By creating an experience,
merchants using LivingSocial do not have to cut prices as steeply as they would if they were
simply cutting the price on one item. LivingSocial does not consider itself a daily deal website,
but rather a local commerce or advertising website.

Daily deal promotions are most useful to businesses that need exposure. To run a
profitable promotion, they must attract new customers and convert them to loyal, repeat
customers. Yet, there is always the chance that a customer who was previously loyal to a
company will purchase the deal. This means that the customer who normally would have paid
full price for the item or service is now only paying part. Businesses can improve profitability by
following some guidelines. They should offer deals with high dollar values, but low percentage
discounts. They should also restrict the time period in which a customer can redeem their
coupon and limit the amount of coupons available. There is room for improvement and greater
profits in the industry if daily deal websites are able to make this promotion more attractive for

4. Social coupons as a marketing strategy: a multifaceted perspective
The success and popularity of online daily deal coupon sites have brought attention
from several other companies in the newspaper and publishing industries. Companies such as
Angie’s List, a business review website, and leading newspapers, such as The New York Times,
The San Diego Union-Tribune and the Atlanta Journal Constitution to name a few, are following
the lead to attract more revenue to their businesses. In fact, it is reported that The San Diego
Union-Tribune is now making more money in deals than in interactive advertising (Patel 2011).
Therefore, it is clear that social coupons are a popular shopping tool for consumers and an
attractive customer acquisition tool for businesses.